We often see insiders buying up shares in companies that perform well over the long term. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So before you buy or sell Methode Electronics, Inc. (NYSE:MEI), you may well want to know whether insiders have been buying or selling.
What Is Insider Buying?
It’s quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, most countries require that the company discloses such transactions to the market.
We don’t think shareholders should simply follow insider transactions. But logic dictates you should pay some attention to whether insiders are buying or selling shares. As Peter Lynch said, ‘insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise.’
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The Last 12 Months Of Insider Transactions At Methode Electronics
President Donald Duda made the biggest insider purchase in the last 12 months. That single transaction was for US$1.7m worth of shares at a price of US$23.79 each. So it’s clear an insider wanted to buy, at around the current price. That means they have been optimistic about the company in the past, though they may have changed their mind. Nonetheless, we consider it positive if insiders want to buy at around the current share price.
Over the last year, we can see that insiders have bought 84.78k shares worth US$2.0m. On the other hand they divested 3.50k shares, for US$121k. Overall, Methode Electronics insiders were net buyers last year. They paid about US$23.71 on average. Although they bought at below the recent price of US$25.93 per share, it is good to see that insiders are willing to invest in the company. You can see a visual depiction of insider transactions (by individuals) over the last 12 months, below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
Methode Electronics is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Methode Electronics Insiders Bought Stock Recently
There has been significantly more insider buying, than selling, at Methode Electronics, over the last three months. Insiders spent US$2.0m on shares. But we did see Independent Director Lawrence Skatoff sell shares worth US$23k. We think insiders may be optimistic about the future, since insiders have been net buyers of shares.
For a common shareholder, it is worth checking how many shares are held by company insiders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Methode Electronics insiders own about US$46m worth of shares. That equates to 4.8% of the company. We’ve certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.
What Might The Insider Transactions At Methode Electronics Tell Us?
It is good to see recent purchasing. And the longer term insider transactions also give us confidence. When combined with notable insider ownership, these factors suggest Methode Electronics insiders are well aligned, and that they may think the share price is too low. If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.
If you would prefer to check out another company — one with potentially superior financials — then do not miss this free list of interesting companies, that have HIGH return on equity and low debt.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.